Well this is my take on the situation.
First the situation in the old JV. Intermost is active in the internet business and Egan never wanted to be in the development of that because it is not their field.
Prime company wanted to have this and wanted to get into the Internet business with Intermost.
So, they buy EGNS out in STOCK of Prime company in which EGNS will have about 20% after the deal.
So, what is in it for EGNS? First of all, valued at $ 1,9 mio. they make a quick profit of $ 900k which falls in q4 (hopefully) which is $ 0.04 per share if I am correct.
EGNS will continue to be the only one who will be getting the Y2K and migration business out of the JV, which is part of the deal. Why else would EGNS throw away a possible 51% of $ 100 mio in sales for the next 5 years for just $ 2 mio, that doesn't make sense.
So, if the JV now get's a contract which is going to be put through to EGNS the JV will get the commission out of it (let's say 10% or something) and the EGNS will do the work so the margins improve immediatly of every contract, not 51% of gross profit but much more.
And now here is my take on the situation here. With this deal the assets increase to over $ 5 mio. which is again a limit for Nasdaq achieved. Then the only limit is the stock price. But remember that EGNS will be holding 20% of a company who is going after the Internet business in China with Intermost, so if this company takes off and the stock goes to $ 10 or much higher (now just $ 1) the value of their stock holding goes much higher. In combination with the growth EGNS can achieve next quarter and the beginning of next year the bookvalue of this company will also rise dramatically and a NASDAQ listing can be achieved if they reach the $ 4 target for a month, and this is the primary goal now. At that time it is easier to get an investment bank behind your company, take over other companies (which by the way they are also looking at now to broaden the base of the company).
And did you all know that there will be a shareholders meeting in december, 12 or 17 I believe. So, everyone can go there and ask their questions.
So, I think Ed has made a nice move with this, also did Prime company. They both stick to their core business and hopefully will profit from it both.
My feeling says this is one part of a plan to get the Nasdaq listing as soon as possible. If he shows revenues in q4 of about 2 mio. the stock will be easily at a higher price. Combined with a takeover of another company, a good contract back log in the future, the shares of an Internet business company on the balance sheet, there is a good chance we see the Nasdaq listing in the first half year of 1999.
So, to all, please give me your take on my view. That is why we are here for. I have discussed this also with other large shareholders and we were also confused at the beginning, but now we think this is a good thing. Sorry for the long post, it has been a while, hahaha.
Rene. |
